Chapter 26 - Insurance Companies (JAIIB - MODULE C)

1. Which was the first life insurance company established in India?

• A. Life Insurance Corporation of India
• B. National Insurance Company
• C. Oriental Life Insurance Company (1818)
• D. United India Insurance

The Oriental Life Insurance Company was the first life insurance company in India, founded in Kolkata in 1818.

2. In which year was the Life Insurance Corporation of India (LIC) established by an Act of Parliament?

• A. 1956
• B. 1949
• C. 1969
• D. 1972

The LIC Act was passed in 1956, nationalising 245 private insurers and creating the Life Insurance Corporation of India.

3. The General Insurance Business (Nationalisation) Act was passed in:

• A. 1956
• B. 1969
• C. 1980
• D. 1972

The General Insurance Business was nationalised under the 1972 Act, creating 4 subsidiaries under GIC.

4. Which committee recommended opening up the insurance sector to private players and foreign investment in the 1990s?

• A. Malhotra Committee
• B. R.N. Malhotra Committee (1993)
• C. Narasimham Committee
• D. Rangarajan Committee

The Malhotra Committee (1993) recommended reforms in the insurance sector, including private sector entry and foreign participation.

5. The Insurance Regulatory and Development Authority of India (IRDAI) was established in which year?

• A. 1993
• B. 2000
• C. 1999
• D. 2002

The IRDA Act was passed in 1999 and IRDAI came into existence in 2000 as the regulator of the insurance industry.

6. What is the current FDI limit in the Indian insurance sector (as of 2023)?

• A. 74%
• B. 51%
• C. 100%
• D. 49%

The FDI limit in insurance was raised to 74% in 2021 through the Insurance (Amendment) Act, 2021.

7. A foreign insurer wants to set up a joint venture in India with an Indian company. As per current FDI rules, what is the maximum stake the foreign partner can hold?

• A. 51%
• B. 100%
• C. 49%
• D. 74%

Under the amended FDI policy (2021), foreign insurers can own up to 74% in Indian insurance companies.

8. Which of the following was a key reason for allowing privatisation and FDI in the insurance sector?

• A. To reduce competition
• B. To bring in capital, technology, and efficiency
• C. To merge LIC with GIC
• D. To reduce employment in insurance

Privatisation and FDI were aimed at increasing penetration, bringing in foreign capital, technology, and improving competition and efficiency.

9. Which country has the largest insurance market in the world by premium volume?

• A. United Kingdom
• B. India
• C. United States of America
• D. China

The USA has the largest insurance market globally, contributing more than one-third of global insurance premiums.

10. As per IRDAI reports, which country among BRICS has the highest insurance penetration?

• A. South Africa
• B. South Africa (above 12%)
• C. India
• D. Brazil

South Africa has the highest insurance penetration in BRICS countries, due to mature life insurance markets.

11. Insurance penetration is measured as:

• A. Premium per capita
• B. Premium as % of GDP + per capita income
• C. Claims paid as % of GDP
• D. Ratio of total premium to GDP

Insurance penetration is defined as the ratio of insurance premium to GDP, showing the sector’s contribution to the economy.

12. Insurance density is defined as:

• A. Premium per capita
• B. Ratio of claims to GDP
• C. Premium as % of GDP
• D. Number of insurers per population

Insurance density measures the average premium per person in a country, i.e., total premium divided by population.

13. As per IRDAI’s annual report, India’s insurance penetration in 2022-23 was approximately:

• A. 7.5%
• B. 4.0%
• C. 2.5%
• D. 6.2%

India’s insurance penetration stood around 4.0% of GDP in 2022-23, higher than the world average of 3.8%.

14. India’s insurance density (premium per capita) in 2022-23 was close to:

• A. USD 400
• B. USD 215
• C. USD 150
• D. USD 91

India’s insurance density is about USD 91 per capita (2022-23), much lower compared to developed countries.

15. Low insurance penetration in India is mainly due to:

• A. High awareness and literacy levels
• B. Strong regulatory framework
• C. Low financial literacy and income levels
• D. Presence of global insurance giants

India’s insurance penetration is limited due to low financial literacy, lower income levels, and lack of trust in insurance products in rural areas.

16. As of 2023, how many life insurance companies are operating in India (including LIC)?

• A. 21
• B. 24
• C. 26
• D. 30

India has 24 life insurers (23 private companies and LIC as the only public sector life insurer).

17. How many general insurance companies are currently operating in India (including ECGC & AIC)?

• A. 25
• B. 30
• C. 31
• D. 31 (including ECGC & AIC)

There are 31 general insurance companies in India as of 2023, including public sector insurers, private insurers, and specialized insurers like ECGC & AIC.

18. Which of the following specialized insurers in India provides crop insurance?

• A. Agriculture Insurance Company of India (AIC)
• B. Export Credit Guarantee Corporation (ECGC)
• C. New India Assurance
• D. LIC

AIC is a specialized government-owned insurer that provides crop insurance schemes in India.

19. Which legislation first laid the foundation for regulation of insurance business in India?

• A. LIC Act, 1956
• B. General Insurance Business (Nationalisation) Act, 1972
• C. Indian Insurance Act, 1938
• D. IRDA Act, 1999

The Insurance Act of 1938 was the first comprehensive legislation to regulate the insurance business in India.

20. Which Act provided for the nationalisation of life insurance business in India?

• A. Insurance Act, 1938
• B. IRDA Act, 1999
• C. General Insurance Business (Nationalisation) Act, 1972
• D. LIC Act, 1956

The LIC Act of 1956 nationalised 245 private insurers and established the Life Insurance Corporation of India.

21. The Insurance Regulatory and Development Authority of India (IRDAI) was created under which Act?

• A. Insurance Act, 1938
• B. IRDA Act, 1999
• C. LIC Act, 1956
• D. Companies Act, 2013

The IRDA Act, 1999 established IRDAI as the regulator of insurance companies in India.

22. The Insurance (Amendment) Act, 2021 increased the FDI limit in Indian insurance companies from:

• A. 49% to 74%
• B. 26% to 74%
• C. 51% to 100%
• D. 49% to 100%

The Insurance (Amendment) Act, 2021 raised the maximum foreign investment allowed in insurance companies from 49% to 74%.

23. Which of the following is NOT an insurance intermediary in India?

• A. Insurance Brokers
• B. Corporate Agents
• C. Credit Rating Agencies
• D. Insurance Web Aggregators

Insurance intermediaries include brokers, corporate agents, web aggregators, surveyors, and TPAs. Credit rating agencies are not insurance intermediaries.

24. Which type of insurance intermediary represents the interests of policyholders by comparing products across insurers?

• A. Corporate Agent
• B. Insurance Broker
• C. Insurance Surveyor
• D. Bancassurance Partner

Insurance brokers represent customers and offer products of multiple insurers, ensuring comparison and best fit for the policyholder.

25. Reinsurance primarily helps insurers in:

• A. Reducing claim settlement time
• B. Marketing new insurance products
• C. Expanding branch network
• D. Managing large risks and spreading liability

Reinsurance allows insurers to transfer part of their risk to other insurers, helping them manage large exposures and protect solvency.

26. In India, which organization is the national reinsurer?

• A. General Insurance Corporation of India (GIC Re)
• B. Life Insurance Corporation of India (LIC)
• C. Insurance Regulatory and Development Authority (IRDAI)
• D. NABARD

GIC Re is the designated national reinsurer in India, mandated to provide reinsurance support to Indian insurers.

27. What is the primary function of an Insurance Repository?

• A. Selling insurance policies
• B. Holding insurance policies in electronic form
• C. Providing loans against policies
• D. Conducting insurance surveys

Insurance Repositories maintain insurance policies in electronic form through an Insurance Account (IA), ensuring convenience and easy servicing.

28. Which of the following is TRUE about an Insurance Account (IA)?

• A. It can hold only life insurance policies
• B. It is maintained by banks under RBI supervision
• C. It allows holding multiple insurance policies electronically under a single account
• D. It is mandatory for all insurance policyholders

An Insurance Account (IA) enables a policyholder to hold multiple life and non-life insurance policies electronically in a single account with an insurance repository.